Public health priorities, executive salaries and the “gold rush” of health care construction were among the topics tackled Sept. 21 in the latest installment of Indianapolis Business Journal’s Power Breakfast Series. IBJ reporter Tom Murphy moderated the panel discussion, attended by some of the area’s foremost health care experts. Following is an edited transcript of the often-spirited discussion, which included a brief interruption by protestors seeking medical insurance coverage for janitorial staff who clean Anthem Inc. buildings.
IBJ: Can you describe the relationship these days in Indiana between health care providers and insurance companies?
HALE: I have a litany of problems and annoyances that bother physicians
that I could read. I am sure that the insurance companies have a similar list of difficulties that they have in dealing with physicians. I think that the core problem is that there is a fundamental difference in our allegiances and what we do.
Being a physician, I am lucky enough to have my practice, my financial success, and my welfare absolutely in line with the health of my patients. If I do a good job, the patients are healthy and I do well.
The insurance companies are generally publicly traded companies and they have stockholders, and I believe that their allegiance is different. It isn’t bad, but it is different, and it is supported by the laws of the land.
They’re not in it for their health, and when I talk to them, I get the idea that there are times when they are not in it for the health of their clients. They are in it for the success of their company and for the success of the stockholders.
So, this causes a difference. It causes the insurance companies to work to be parsimonious and careful in the way that they hand out money, and the doctors
have to work to try to get money that they seem to think is a good idea for their patients.
It isn’t a matter of one being right
and one being wrong, but it is certainly a problem that has caused fragmentation and difficulty in the care of patients.
LEE: Well, since Dr. Hale took his opening shot at Anthem, I think it’s probably worthwhile for me to lead that I would absolutely agree with you, Brad, that our reimbursement system is perverse, and there are misaligned incentives in health care that are a large part of the problem that we currently see with health care affordability.
I think, though, that the insurance companies actually are very motivated for their membership to have improved health, because the improved health of our membership actually lowers health care costs, which benefits the insurance companies. So, our incentives are very much aligned with improving the health of our membership.
In fact, I would contend that some of the perverse incentives are with providers of health care because, to some degree, in a fee-for-service world, there is no incen
tive for quality of care from a financial incentive, because poor outcomes oftentimes drive more services, which drive
more revenue for health care providers.
Now, in no way do I mean to insinuate that providers would intentionally provide poor quality of care, but because of the financial incentives in a fee-for-service world, it creates these misaligned incentives.
SLABOSKY: That comment about feefor-service practice, it’s interesting that the General Accounting Office just released a report where they looked at hospital costs around the country. And one of the factors that influence hospital costs, they determined, was the percentage of doctors and hospitals that are reimbursed on a capitated model [in which the medical provider receives a flat fee per patient by a managed care organization rather than a fee for each service].
In communities that have a higher capitation rate, they found the hospital costs were actually lower. So, there’s another methodology for reimbursing or for paying doctors and hospitals besides the standard fee-for-service system, and one of
the things we need to do is take a look at these alternative-reimbursement systems.
IBJ: Alex, managed care was slow for catch on in Indiana. What’s the atmosphere now, and what models are businesses embracing to help keep costs down?
SLABOSKY: Well, despite the perceptions to the contrary, managed care in Indiana is pervasive and growing. Most people are familiar with the best-known type of managed care, HMOs. In the state of Indiana, we now have 870,000 Hoosiers enrolled in HMO plans, about 14 percent of the population.
But managed care is not limited to HMOs. Virtually every insurance plan, every self-insurance plan in Indiana, and most government health plans, have adopted many of the managed care programs introduced by HMOs. Almost every health plan in the state uses some sort of contracted network of physicians, hospitals and other providers who have agreed to negotiated-fee schedules.
Most health plans have prescription drug formularies, negotiate rebates with pharmaceutical companies, and provide financial incentives to encourage the use of generic drugs. These are things that were pioneered in the HMO industry.
The Medicare prescription drug plans,
which will become effective on Jan. 1, are basically managed care plans. Many, if not most, health plans, require precertification of certain medical and surgical procedures and prescription drugs. An increasing number of health plans, Anthem being one, requires precertification of certain imaging procedures. Disease management and wellness plans are increasingly common in health plans across the board.
So, I think, in Indiana, virtually every health plan is a managed care plan today. They’ve adopted the principles that were pioneered by HMOs.
IBJ: Dr. Lee, is it possible to tie health care [construction] to the rising cost of
health care? Why or why not?
LEE: I think that health care construction, particularly in our hospitals in central Indiana, has certainly had our attention recently. I would contend that that construction really has a minimal impact overall on rising health care costs, for a number of reasons.
First of all, those costs are amortized over a number of years.
Secondly, for the most part, that construction is market-driven. It’s in areas where there’s a need. Clearly, some of the counties that are contiguous to Marion County are some of the fastest-growing counties in the nation.
Thirdly, the Federal Trade Commission and the Department of Justice looked at the issue of certificate of need and its
impact on the affordability of health care. Their conclusion was that certificate of need really does not appear to have a positive impact on affordability of health care and, in fact, in some cases, may actually have an adverse effect on the affordability of health care by disrupting normal market forces.
Finally, I think that construction in many cases enables an institution, a hospital or physicians to adopt the latest medical technology, which can further advance both the efficiency and the costeffectiveness of health care.
However, I would add that the key is that the health care delivery system be integrated in such a way that there are financial incentives both for the appropriateness of health care services as well as for higher quality of health care services. While I don’t think construction is a big part of driving health care costs, the things that do primarily are unhealthy lifestyles, the uninsured, chronic diseases, new technology, medical malpractice insurance costs and the aging population.
IBJ: Heart hospitals in Indianapolis are always a big topic of conversation. We
have two stand-alones, and all of the
major networks have pretty prominent
cardiology programs. Do you believe
there is a need for that much service in
this market in cardiology?
LEE: We, at Anthem, looked at the utilization of cardiac services a year after the opening of the Community and the St. Vincent heart hospitals, which opened virtually at the same time, early in 2003, and we saw that there was not a significant increase in the utilization of cardiac
services more than what we would have expected from the normal trends of those services prior to that time.
So, it’s our belief that, at least from the data that we’ve seen so far, that those cardiac hospitals have not driven increased cost of care in Indianapolis.
IBJ: Anyone else have a response?
BRODY: Well, I’ll take the opportunity to suggest that I really don’t believe that all of the development that you’ve suggested is appropriate, particularly in the case of situations where there’s physician ownership in the hospitals. What we have taking place right now, if you haven’t observed, is there’s a gold rush taking place, and it’s not market-driven; it’s economically driven.
These hospitals are developing in areas where there are well-heeled, well-insured populations. And with physician ownership, I think we are setting ourselves up for a huge fall. The not-for-profit sector, which has supported and provided the infrastructure for taking care of the 45 million uninsured across this nation, is being impaired significantly. The skimming of the cream, if you will, is occurring.
In the five new hospitals in the Indianapolis marketplace-the two new cardiac hospitals, in which St. Vincent and Community are partners, the new orthopedics hospital and the two new Clarian facilities, and I read in the paper today that possibly another Clarian facility will open in Lafayette-physician ownership is, I think, a very, very negative trend.
And I would toss the ball back to Anthem, suggesting that it is an inappropriate use of our insurance dollars to reim
burse for care given at those facilities.
I don’t have a problem with outpatient services being provided by physician [owners]. We are joint-ventured in many different scenarios. But when you get into the core service of what hospitals deliver… We’re over-bedded as it is, and the hospital development that you’re seeing today is largely driven by physician-ownership interests and organizations using physician participation as a strategic advantage.
IBJ: Dr. Hale?
HALE: I think that the building of new hospitals is a brilliant business decision. It should not be contaminated with the false notion that it’s meeting a health care need, which it’s not. My notion is that we have enough heart hospitals to take care of Europe. And the hospitals that we are needing, we don’t have. We do not have enough pediatric psychology/psychiatry units to take care of Broad Ripple.
SLABOSKY: Bob, I just think you acknowledged that we are over-bedded in this community.
BRODY: Absolutely, and no thanks to the investment community and those that would choose to profit from the health care industry that neglects-vastly neglects-the uninsured in this country.
SLABOSKY: So, we’re over-bedded in this community and we are building additional hospitals. Dr. John Bielenberg at Dartmouth University has been looking at variations across geographical areas in hospital utilization in America for years and years and years, and what he’s found consistently is that an increase in hospital
beds results in an increase in medical utilization of those beds. More beds, more utilization, more cost, higher insurance premiums. So, I think we need to be very aware of that when we’re concerned with our costs.
BRODY: Alex, you’re mixing apples and oranges here. That’s not exactly what I said. And to Dave’s point, there is appropriate reinvestment in hospitals that’s required in order to keep up with technology and to deliver services more efficiently.
What I’m objecting to is physician ownership of hospitals, which strikes at the core of the infrastructure that we have in place today that cares for the uninsured. The real travesty here is the fact that we have a nation that neglects 45 million individuals, doesn’t provide insurance for those individuals.
We had an opportunity two weeks ago to look at New Orleans. I think the lieutenant governor said it was the first time we’ve really confronted the poor in our society. We saw it projected on the screen en masse.
Well, what we saw compares nothing to the magnitude of the numbers of uninsured across this nation. That’s what we ought to be concerned with. The biggest reason for personal bankruptcy in this country is health care costs.
SLABOSKY: And I agree with you, and whether they’re investor-owned, community-owned or physician-owned, increasing the number of beds in the community increases costs, and increasing costs increases the number of uninsured people. We do have a disaster, we do have a problem in the community, and we need to look at it from a systematic point of view.
IBJ: OK. Let’s talk to one person who hasn’t answered a question yet, Nancy
Jewell. What’s Indiana’s top public health priority, and is it currently a top priority?
JEWELL: I think that there are a lot of top-priority health problems that….
(Editor’s note: At this point, the discussion was interrupted by a brief protest staged by uninvited guests regarding uninsured janitors at Anthem.)
JEWELL: Well, I’m sure that if you look at the media, you see that there are a lot of top health priority areas. They change every year. This year is obesity. But I think that those are all healthimprovement areas.
I think that we need to more aggressively deal with health disparities in populations that aren’t accessing services. You have racial and ethnic minorities that suffer disproportionately from a lot of health conditions. You have a rural population in Indiana that’s not accessing services. They are suffering disproportionately from a lot of preventable-and that’s the key-preventable health conditions.
So, I think until we start aggressively addressing disparities across the board, then we’re not going to see any improvement in some of these health measurement areas that we continue to publicize each year as things we should work on.
We’ve done some work in addressing disparities at the state level, but we need more partners out there trying to help us address disparities: insurance companies, physicians and others that have not played a real active role in trying to aggressively deal with disparities in these
populations in Indiana as a partner.
IBJ: What’s one example of aggressively dealing with these disparities?
JEWELL: Well, I think what we do in public health [is], we say, “OK, this program will work with all populations in dealing with, say, obesity.” But it doesn’t work with all populations. You have cultural differences, you have age differences.
So, we need to look at more non-traditional programs that we can support. A lot of times you can’t get funding for those programs. We need to engage churches and other groups that are reaching out to those populations to get them into our health care delivery system. We need to develop a public health infrastructure that’s not just there at the clinic, but actu
ally going out to the people that are hard to reach and trying to get them to access the system.
LEE: And to tie in our little interruption [from the protesters] as well, I think the uninsured present a critical topic to health care viability in our community. Clearly, care for the uninsured drives up costs for a variety of reasons, one of which is that those without insurance oftentimes wait until they’re critically ill before they access the health care system. Their access to the health care system is through emergency departments.
Secondly, by the time they access the health care system, they’re oftentimes critically ill. So, instead of obtaining the necessary preventive services or services
early in the course of their illness, they’re oftentimes critically ill, and the result is a very expensive hospital bill.
I think that the way that we currently handle the uninsured is very inefficient, and from a contracting role with hospitals, part of our role is to help hospitals to pay for that care that they’re not reimbursed for. And, unfortunately, that bill gets taken to our employers.
I think dealing with the uninsured head-on and trying to find more efficient ways to pay for the uninsured and the underinsured is a critical aspect of health care affordability.
IBJ: Mr. Brody, what will be the next
big breakthrough toward achieving more
affordable health care?
BRODY: I think I have to begin by suggesting that health care costs are going to continue to rise. I think that’s unavoidable. We’ve got an aging population. We have an unhealthy population, as a rule. We’ve got amazing technology that is available, and it upgrades on a daily basis. The things that are in the works for tomorrow are going to simply astound us. The pharmaceutical industry also has incredible technology in genomics and many, many other fields. We use a lot of petroleum-based products in health care. That has a financial impact.
There is more specialization that occurs as we get more and more refined in dealing with health care issues. You develop additional expertise, but there’s a proliferation of specialists, and that’s an expensive proposition.
Health care, in hospitals particularly, is very labor-intensive. Sixty cents of every dollar we spend has to do with labor.
We talk about the unbridled competition. I think that’s a huge health care factor and I think it needs to be addressed.
What occurs-what Dave was just alluding to-is probably the biggest mystery in health care, and that is the cost shift. Medicare and Medicaid, which bear over 50 percent of the health care expense in this country, do not pay [all] costs. Those costs are shifted to the commercial payers.
As the price of health care premiums gets higher, more employers opt out, leav
ing more and more individuals uninsured. Those costs are borne by the hospitals that are currently taking care of the underreimbursed Medicare-Medicaid patients and it exacerbates the situation, meaning that the cost shift gets larger and larger and the price is becoming unbearable.
That’s a huge, huge issue. If you don’t realize it, it is. It’s exacerbated by, in part, the market dominance. As Anthem gets more and more market strength, they’re able to negotiate better contracts. That makes it harder and harder for the hospitals to deliver care to the uninsured.
And if you ask about psychiatric services-there aren’t too many psychiatric hospital providers in the marketplace because they can’t afford to do it.
We’ve talked about the premium skimming. We talked about the gold rush. I will have to tell you that we need to drive to a system that better aligns the financing and delivery of health care.
IBJ: We have questions from the audience. Dr. Lee, do you think Anthem/Well-Point executives are underpaid?
LEE: I think that there are market forces that control compensation of anyone in their occupation, and we can look at professional sports as an example. Peyton Manning makes millions of dollars for throwing footballs, and at first glance, you ask, “What value does that serve to society?” But at second glance, you look at the revenue in professional sports and the advertising dollars and so forth, and that drives that market force that makes the value of what he does what it’s worth.
In the case of the executives at Anthem, particularly our most senior executives,
their compensation is set by the board, and the board is made up of non-Anthem executives-businesspeople, who actually are, in large part, paying health care bills, and they determine the goals that Anthem needs to attain in order to set his compensation.
I would suggest that if we were all compensated in that way, where we had independent experts that determined what goals our organization needed to attain in order to set our income, it would probably improve the performance of our individual organizations.
So, my point is, though, that I think that it’s part of the market forces. The compensation of our senior-level executives makes up a small fraction of our revenues, and so it really has no measurable impact on premium dollars.
HALE: If Anthem wanted to have an independent assessment of the executives from the board, they should have some of their clients on the board.
IBJ: How soon do you see outcomebased, quality-of-care statistics on individual health care providers being available to the general public?
LEE: I think that the most exciting advance in health care is the work that is currently being done by Marc Overhage and the Indiana Health Information Exchange, and I’m just disappointed that he wasn’t able to participate this morning.
(Editor’s note: Overhage, CEO of IHIE, was invited to attend the Power Breakfast but could not attend.)
I believe that the savior for health care is to promote quality in health care, because unlike most products and servic
es, higher-quality health care is actually more affordable health care. I think that the work that Marc Overhage and IHIE is doing will help us really get our arms around the quality of health care services that are being rendered in our community.
Currently, our judgment of health care quality is primarily based on claims data, which is not a very effective or efficient way to assess the quality of health care.
With IHIE and the work that they’re doing, we’ll actually be able to obtain clinical data that will tell us exactly how well a physician or a hospital is doing.
And as we are able to explore that further and share that information with the public, it really will drive, I think, some meaningful transformational change in health care affordability. How soon will that data be to the public? I anticipate within the next 12 months.
JEWELL: I agree with Dr. Lee, and some of the information infrastructure that we’re putting in place now are the results of the 9/11 episode. The state Department of Health and the bioterrorism centers will begin to provide us with utilization data from the hospital as well as clinical-outcome-type data.
SLABOSKY: I think it’s going to be some time before we get meaningful, usable data on individual practitioners that an individual consumer can make sense of. What we really want to focus on is getting quality data on what I’m calling our health delivery systems. St. Francis has a system of care. Clarian, Community and St. Vincent have systems of care.
I think it’s going to be some time
before we get meaningful data on individual practitioners, and I think looking at data from the individual practitioner is not going to be very helpful in the long run. We want to look at systems of care.
JEWELL: Well, if you’ve read the Institute of Medicine report, having individual data on practitioners’ quality of care is going to be very important in dealing with the disparity issues.
IBJ: What’s an obstacle toward getting individual data?
JEWELL: You have [health information privacy laws] as far as what you can release to the public. That’s one barrier, but also you have the issue of clinicians being willing to collect all of the data that will be needed to look at true clinical outcomes.
HALE: I think that the idea of there being good doctors and bad doctors is, in a sense, true, but it’s a little bit simplistic. Twenty-five or 30 years ago, doctors were not contracted by insurance companies, so that a primary-care doctor could refer a patient to anyone that they wanted to.
There are three child neurologists in private practice in Indianapolis, and I am certain that primary-care doctors will look at one patient and say, “Oh, this one is really good for Peter Castellanos. He can take care of this better than anyone.” And then another one, they might send to Jim Pappas, and then a third they might send to me.
This is the best way to control and to determine who is the best doctor. This is one of the few ways that the free market force used to work. That’s been taken away because doctors are hired and sort of controlled by the insurance companies.
BRODY: That data is being collected now. Medicare data is being aggregated and reported under the federal government’s Hospital Quality Alliance program. There are 3,500 hospitals around the country that, on a quarterly basis, report data.
Currently, it’s in three major diagnostic areas they respond to write-in questions, the common measure as to whether or not quality activities are in place.
And as recently as July, The Wall Street Journal had a front-page article, reporting on Harvard University School of Public Health’s analysis of that data, and I have to tell you that Indianapolis fared fairly well. Indianapolis ranked fifth out of 40 metropolitan areas for the treatment of heart attacks, 17th for congestive heart failure, and second in the country for the treatment of pneumonia.
That information is being gathered, and it’s going to be expanded to look at physician information as well.
LEE: I’d like to make one very brief point, and it was stimulated by Brad’s comment about good and bad doctors. I think that currently the thinking is that there are not good and bad doctors, that the problem is really processes.
The average physician has an impossible task in front of them with so much information that is coming at them from a given individual patient, from their entire patient population, from the medical literature, that it’s impossible to assimilate all of that in a 10-minute office visit.
And the problem really is to give them the necessary support to allow them to
conduct those processes more efficiently, and that’s really the direction that health care needs to go.
IBJ: Should we and how do we ask
those persons who engage in behaviors
that increase health care costs to take on a larger share of health care expenses?
LEE: Unhealthy lifestyles are, in my
opinion, the largest driver of rising
health care costs. How do we encourage, though, consumers of health care to
adopt healthier lifestyles? That’s the critical question.
I think that there has been certainly a direction with the health insurance industry toward consumer-directed health plans. And the theoretical basis of consumer-directed health plans is to hopefully make the consumer more financially invested in their own health care, and hopefully as a result, they will become a wiser consumer. The key, though, is they have to have the necessary information to allow them to make good choices.
BRODY: I think we need a revolutionary change in the way we look at insurance in this country. We need to move away from actuarial-based models and attributing blame and responsibility to individuals and insurance companies and evaluating whether someone’s a good risk or not. We need to move to a social enterprise of insurance, as they do in the rest of the industrialized world, where everyone is covered and you’re not battling over who the good risk is vs. the bad risk.
HALE: I don’t think that we need to do teaching. People know what to do. If I want to make a third-grader laugh in my office, I say to her, “I’m going to step outside for a smoke,” and she’ll just start laughing. And people know what they should eat. I think that we need to make changes so that it’s easier to adopt these lifestyles. One is to take junk food out of the schools. Another is to continue to make it difficult to smoke, and a third is to provide bicycle trails so that people can ride to work.
JEWELL: I think, as a consumer advocate, I believe that the consumer does have a responsibility to make healthy lifestyle choices, but I also think that we, as a public health system or a health care delivery system, have an obligation to make sure that those consumers can access services so that they can make healthier lifestyle choices.
SLABOSKY: I just want to support the earlier comment. I agree 100 percent with Bob that we need to move from an actuarial insurance system to a social insurance system, where you don’t have an individual in a small group with very high insurance premiums simply because that small group has one person with a very high-cost, very expensive case.
But we do have to produce or provide a structure that allows people to change their habits. My daughter is a senior at North Central High School. They need to get rid of the deep-fat fryers in the school cafeterias. They need to give the children an alternative of better food in schools.
There should be no reason why they’re serving junk food in the schools. There should be no reason why they don’t have a physical education program in the schools. These are decisions the state Legislature can make very quickly.
IBJ: The next question from an audience member: Please ask the panelists for
their views on a single-payer, Medicarefor-all, universal-coverage program.
JEWELL: Well, I think if you had just a single-payer Medicaid-for-all program, then the consumer would be limited to what that single payer will provide as far as benefits, as far as their formulary and other issues like that. Coverage for all would be excellent. I’m not sure if it would be affordable to do that through Medicaid, but I think looking at options to make sure everybody had access to insurance coverage is important.
IBJ: Do you think the Medicare-for-alltype system would hamper coverage
because it limits choices?
JEWELL: I think that there could be some restrictions as far as coverage if you’re on a certain type of medication and the formulary does not allow you to have access to that medication.
LEE: I would agree with Nancy that the major disadvantage of a single-payer system is limitation of choice. And, currently, the difference between Medicare and commercial insurance is that Medicare has a very limited number of benefit plans. Whereas at Anthem, we have hundreds or thousands of benefit plans, depending on the individual account and the specific benefits that they want.
And there are costs associated with the administration of that. And I will take exception to what Dr. Hale said earlier about a market-driven solution is not possible. I think that market drivers really drive efficiencies, and a multi-payer system still is the best approach because it has those competitive market drivers to encourage the direction of products in the marketplace.
BRODY: I just have to say, we need to wake up. We have so many vested interests at stake here trying to protect the status quo that the inevitable answer, the ultimate answer, is a single-payer system that takes care of everybody and lets the providers compete for that business as necessary. It works in other countries around the world. It can work here.
SLABOSKY: Virtually everybody agrees that the current American health care system does not work well. It’s expensive. It’s inefficient. It excludes too many people. It does not meet quality expectations. It doesn’t work. And we’re all running around trying to save a system that doesn’t work. The fact is the levy is broken. We need to do something to fix it.
IBJ: Does the overhaul need to be a
HALE: My motto is: If you want to see market-driven health care, look around you. So, this has to be made by somebody outside, and it could be the federal government.
LEE: And I’ll share with you just my personal experience from last week. I was in Washington to meet with Barry Straube, who’s the acting chief medical officer of the [Centers for Medicare and Medicaid Services. Essentially, we had a very simple question for him, which was: Can we have Medicare data from Indiana to evaluate physician performances for our payment for value program? And the answer is-probably as you would expect: Maybe you can and maybe you can’t. We’ll get back to you on that. And
that’s my concern about a governmentdriven health care system and some of the choices that it would potentially limit.
JEWELL: I agree with Dr. Lee. I think that part of the problem is that we have put in place some federal policies, administrative and legislative, that are limiting people from accessing services. I think if it’s driven by the federal government, without the appropriate people and input into that process-the consumer and other people that are impacted by those decisions-then you might come up with a model that doesn’t work as well.
SLABOSKY: But we have a marketdriven system that excludes 45 million people from the system. It provides no health insurance, no coverage for them.
The market system as we have it today simply isn’t working. If you don’t want a federal system, if you don’t want a singlepayer system, we need to change the existing market system.
IBJ: What can employers do to continue to provide high-level benefits without losing their businesses?
LEE: I think the key aspect for employers is to encourage the adoption of healthier lifestyles among their employees. Chronic illnesses and unhealthy lifestyles are the primary drivers of rising health care costs.
JEWELL: I think even looking at incentives for incorporating healthy lifestyles would be one way of trying to deal with that, and making sure that your employ
ees have access to ways to implement healthy lifestyles.
BRODY: Well, I think we need to be better consumers of health care as employers. We have 4,000 or so employees, and it’s very important that we steer our employees into the health plans that are mindful of the other things that can be done to keep employees healthy-disease prevention programs, promoting healthy lifestyles, and working with a responsible and accountable network of providers.
HALE: I don’t think that there is very much that employers can do. All of these things that we have suggested point up something that I once read-the way to use the American health system is: Don’t get sick.